Maintaining the Reseller Defense After the FACT Act

For the first time with the passage of the 2003 Fair and Accurate Credit Transactions Act (FACT Act), the Fair Credit Reporting Act (FCRA) defines a reseller as a “consumer reporting agency” (CRA). This denotes a sea change in the law as interpreted by the courts. Prior to this definition, cases addressing the issue generally concluded that although a reseller might undertake activities that transformed it into a formal CRA, it was not necessarily one per se. Under the new definition, resellers appear to be a distinct subset of CRAs. This distinction becomes more clear when we understand what resellers are and what they do, i.e., they neither maintain nor evaluate the information in a consumer report and, accordingly, have fewer legal obligations than CRAs with respect to maintaining the privacy and accuracy of such reports. They are simply a conduit of information from the actual CRA to an end user. Companies operating as resellers should take steps to maintain the status because resellers not only have fewer compliance obligations, but they also can avoid liability for inaccuracies in consumer reports. This article explains how companies can maintain the reseller defense in light of the Act as amended.